The ongoing conflict in West Asia, sparked by joint United States-Israeli military strikes on Iran on February 28, 2026, now stretches well into its second month. It extends beyond a regional geopolitical crisis. Its cascading economic consequences mark a civilisational disruption, sending tremors across continents and economies far removed from the theatre of war. 

Kashmir’s cottage industry, long the cultural spine and economic lifeline of the valley, now faces a moment that could undo years of painstaking recovery.

Understanding the vulnerability of Kashmir’s handicraft economy begins with grasping the scale of the catastrophe unfolding in West Asia.

Operation Epic Fury, the name assigned by the United States to the joint military campaign, has assassinated Supreme Leader Ali Khamenei and dismantled significant parts of the Iranian state apparatus. The offensive has also unleashed a war of unprecedented regional breadth. 

Iran’s retaliatory strikes now target all six Gulf Cooperation Council states, including Bahrain, Kuwait, Qatar, Saudi Arabia, Oman, and the UAE, marking the first instance in modern history of Tehran directly engaging all its Gulf neighbours at once.

The strategic and economic heart of this crisis lies in the Strait of Hormuz. 

In 2025, roughly 25 percent of the world’s seaborne oil trade passed through this narrow passage, along with over 110 billion cubic metres of liquefied natural gas, representing nearly 20 percent of global supply, much of it from Qatar. Iranian military operations have slowed commercial traffic in the strait to a near standstill. 

The International Energy Agency describes the resulting disruption as the “largest supply disruption in the history of the global oil market.” Brent crude, which traded around $70 per barrel before the conflict, has surged past $110 per barrel, with volatile price swings fueling fears of a global energy crisis.

Amid this backdrop of geopolitical conflagration, Kashmir’s cottage industry occupies a particularly exposed position. 

The valley’s artisans have crafted their livelihoods from the finest materials, including Pashmina and Kani shawls, hand-knotted silk and woollen carpets, papier-mâché, walnut wood carving, crewel embroidery, chain-stitch work, and Sozni needlework for generations. 

These creations extend beyond commodities, serving as repositories of cultural memory, with techniques handed down across generations in the intimate domestic spaces of karkhandar workshops and home looms that define cottage production.

Official data shows that Kashmir’s handicraft sector recorded exports worth around ₹410 crore during the first half of the Financial Year 2025-26, with Gulf countries, Europe, and North America emerging as the most critical international markets. The Gulf alone represents a market of singular importance. 

Kashmiri embroidered shawls, particularly the turma worn in turban style, enjoy a devoted clientele in GCC states, while hand-knotted carpets and Pashmina products attract the most affluent buyers in the luxury markets of Dubai, Riyadh, Doha, and Abu Dhabi. 

This dependence on the Gulf reflects a structural reality, rooted in cultural affinity, geographic proximity, and decades of commercial engagement.

Official figures from the Directorate of Handicrafts and Handloom show that Kashmir’s handicraft exports, which peaked at ₹1,162 crore in 2023-24, fell to ₹733 crore in 2024-25, a decline of nearly 37 percent, largely driven by global conflicts and disrupted demand from Europe and West Asia. 

The current escalation intensifies this structural vulnerability, pushing the sector toward an acute crisis.

The West Asian war affects Kashmir’s cottage economy through multiple, mutually reinforcing channels. The paralysis of the Gulf market delivers the most immediate impact. 

Tourism in the UAE and Qatar has dropped sharply, with hotel bookings collapsing and economic hubs like Dubai experiencing what analysts describe as near standstill. 

The Gulf’s mercantile classes, who are the wealthiest and most consistent buyers of Kashmiri luxury crafts, are focused on survival rather than consumption. Trade exhibitions, luxury retail events, and cultural fairs that once served as launchpads for Kashmiri artisans in GCC capitals have been cancelled or indefinitely postponed. Buyers who once acquired a Kani shawl in a Doha emporium or commissioned a silk carpet from a Srinagar exporter through a Dubai showroom now contend with missile alerts and fuel shortages. Discretionary spending on artisanal luxury naturally retreats in times of existential uncertainty.

The freight and logistics shock represents a second and equally severe channel of disruption. 

The widening conflict has driven a global surge in shipping costs and insurance premiums, with vessels rerouted away from Gulf ports, creating congestion at alternative ports and delaying shipments worldwide. 

Kashmir’s exporters, already constrained by landlocked geography, high freight costs, and dependence on mainland Indian port infrastructure, face direct pressure on the thin margins that sustain cottage-scale exports. 

The artisan who earns a daily wage weaving a carpet does not bear these costs. The exporter absorbs them, often reducing or cancelling orders as a result.

India’s macroeconomic vulnerability adds a third dimension to the crisis. 

With limited strategic oil reserves and heavy reliance on Middle Eastern crude, India ranks among the economies most exposed to a prolonged disruption. Rising energy prices are driving inflation, weakening the rupee, and putting growth under pressure. 

A weaker rupee, while theoretically boosting export competitiveness in nominal terms, increases the cost of imported raw materials and energy, compresses household incomes, and accelerates domestic inflation. 

UN estimates indicate that oil prices have risen by around 45 percent and gas by 55 percent since late February, with regional inflation in Asia projected to reach 4.6 percent in 2026, up from 3.5 percent the previous year. 

Even modest inflation in food and fuel translates directly into the difference between sustaining a craft and abandoning it for Kashmiri artisans, many of whom earn daily or weekly piece-rate wages.

A profound, if painful, irony lies at the heart of this crisis. The Persian aesthetic tradition from the Safavid courts of Isfahan, which sent master weavers and designers to Kashmir under Mughal patronage, forms the foundational grammar of Kashmiri craft. 

The carpet, the shawl, the paisley or buta motif that adorns the valley’s most iconic products all carry the imprint of Iranian civilisational influence that shaped the industry at its very origins. 

Today, the war that has reduced parts of Iran to rubble is, through its economic dislocations, gradually unraveling the markets built upon that same civilisational continuum.

It would be misleading to portray the crisis as absolute or irreversible. Industry stakeholders emphasize that Kashmiri handicrafts occupy a niche market prized for their authenticity and craftsmanship, creating opportunities even in turbulent times. 

The sector’s recovery from pandemic-era lows to record export figures in 2023-24 demonstrates a defiance that should not be underestimated. 

Structural diversification of export destinations, with European and North American markets providing a measure of counterbalance to Gulf volatility, offers an additional buffer.

The current crisis, however, highlights several long-standing imperatives with renewed push. 

The cottage industry’s reliance on a narrow cluster of Gulf markets leaves it systemically exposed to the very geopolitical shocks now unfolding. Expanding market penetration in East Asia, Australasia, and Latin America, regions less affected by Middle Eastern turbulence, must shift from aspiration to actionable policy. 

Digitising supply chains, developing direct-to-consumer export platforms, and strengthening GI-tagged product certification are instruments of economic survival.

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Artisans sitting at looms or embroidering Sozni shawls do not track the movements of the Strait of Hormuz or the trajectory of Brent crude. But the war raging in West Asia draws a direct, if invisible, line between the fires of Tehran and the silence of a Kashmiri workshop. 

Geopolitics does not accommodate the delicacy of craftsmanship. The valley’s artisans, its most vulnerable economic constituency, deserve both the protection of responsive governance and the value of markets that endure beyond the volatility of distant wars.

 The author is a final year economics student at University of Delhi and writes regularly on UT’s economy. He can be reached at [email protected].

© Kashmir Observer